JG/Retailers Slam Ministry’s Market Decree

In a move critics say smacks of protectionism and goes against fair trade practices, the Ministry of Trade has issued a decree banning hyperstores, shopping malls, supermarkets and mini-markets nationwide from opening outlets near traditional markets and levies fees on the products they sell.

The decree is a follow-on to a 2007 presidential regulation and aims to help traditional markets survive in the face of multiplying â€śmodern marketsâ€ť - some of which are foreign-owned. It also bans foreign firms from having any ownership in supermarkets and mini-markets.

The decree, issued on Tuesday, mandates a promotional system for modern markets by regulating listing or administration fees for each product sold, as well as conditional and fixed rebates for shoppers.

â€śIt's about how we, the government, want to balance the existence of markets without detracting any of the marketsâ€™ stakeholders,â€ť Minister of Trade Mari Elka Pangestu said. â€śHowever, by this decree we also want to maintain healthy competition between traditional and modern markets.â€ť

The listing fees require hyperstores like Giant and Carrefour to pay Rp 150,000 ($13.95) per product per outlet, with a maximum ofRp 10 million every two weeks for the entire chain. Fees for supermarkets like Hero will be as much as Rp 75,000 per product per store, with a maximum of Rp 10 million per fortnight. Minimarkets will pay Rp 5,000, and a limit ofRp 20 million.

â€śHopefully with the new decree, traditional markets will be able to survive and keep up with the current market competition,â€ť said Ngadiran, secretary general of the Indonesian Traditional Market Vendors Association.

There are 12,000 traditional markets in Indonesia, but the Trade Ministry estimates that 80 percent are thought to be struggling. Many buildings that house traditional markets are more than two decades old and not properly maintained.

But not all market players welcomed the new decree. Indonesian Retailers Association chairman Benyamin J. Mailool said the new rules go against global best practices.

â€śIt is really too much for the government to go this far because, essentially, these issues are part of market players' daily routines,â€ť he said. â€śThe government should not regulate how we deal with suppliers and customers.â€ť

According to Benyamin, the presidential decree, the legal framework for the ministryâ€™s rule, states that trade cooperation between suppliers and retailers must adhere to the principles of contractual freedom.

â€śRetailers cannot compel suppliers to bring goods into their shops, and suppliers cannot force retailers to accept their goods,â€ť he said, adding that the presidential degree states the relationship between retailers and suppliers is to be based on mutual free agreement without interference from any other party, â€śnot even the government.â€ť

The retailers association has appealed to the ministry to make the decree more balanced in its treatment of modern and traditional markets. â€śWe sent three letters to them, but there was no reply,â€ť Benyamin said, adding that the association is considering legal action.